Issues addressed by the authors and their relation to the value of customer relations
Porter and Kramer (2011), in their article Creating shared value, pointed out that the assumed trade-off between economic efficiency and social progress may not be real. The authors describe some initiatives from companies and Non-Governmental Organizations (NGOs) that bridge the apparent gap between business competitiveness and social advancement, as they define the concept of ‘Shared Value.’
One of the most striking suggestions of the authors is that companies miss business opportunities as they fail to fully consider the most critical customer needs. A clearer example could not be offered as Porter and Kramer (2011) mention food companies focusing on nutrition rather than taste (p. 67). Porter and Kramer (2011) give another example of a Shared Value Initiative when they describe Vodafone’s ten million Kenyan customers, which use of mobile banking services handle funds that amount to 11% of Kenya’s GDP (p. 68). Vodafone – a telecom company – creates a lot of value for its customers, which can increase their personal income by the ample availability of banking services – a business area detached from telecommunications.
Porter and Kramer (2011) also directly mention that communities, where businesses are located, perceive little to no benefit as profits increase; in fact, a common perception is that the benefits come at the community expense (p. 66).
Ethical Considerations
Beschorner (2014) criticized the Shared Value Initiative from a business ethics standpoint. The author concedes that the initiative is a “welcome attempt to mainstream business ethics among management practitioners” (Beschorner, 2014, p. 106), but indicates that Porter and Kramer (2011) have an empty critique of Corporate Social Responsibility (CSR). Beschorner (2014) decries their characterization of CSR as limited, focusing only on philanthropy, while the recent academic debates indicate that CSR is an integral part of business practices. In other words, Beschorner (2014) states Porter and Kramer (2011) make a “straw man” argument to differentiate the Shared Value Initiative from CSR.
Moreover, Beschorner (2014) argues that the economic arguments fostered by Porter and Kramer (2011) are limited. The author indicates that the Shared Value Initiative see markets as a superior form of coordination among economic players, as contrasted to regulations. Lastly, Beschorner (2014) heavily criticizes the notion that a company should prioritize stakeholders’ interests, and denounce Porter and Kramer (2011) for suggesting it.
Economic Significance of Shared Value
Porter and Kramer (2011) argue that the concept of Shared Value could unlock “the next wave of business innovation and growth” (p. 77). The authors further their point indicating that Shared Value offers businesses the opportunity to use their resources to lead social advancement in ways unmatched by governments and NGOs. If these bold statements are true, there is a lot of economic significance in Shared Value.
However, Crane, Palazzo, Spence, and Matten (2014) offer an extensive, elaborate critique of Shared Value that underplays its significance. Resonating the criticism of Beschorner (2014), the authors indicate that a modern notion of CSR encompasses the concept of Shared Value – therefore, Porter and Kramer (2011) did not offer a breakthrough. From an economic point of view, Crane, Palazzo, Spence, and Matten (2014) indicate that Shared Value ignores the inherent tension between social and economic goods (p. 136). The authors further state that it has a “myopic focus” when reimagining new products, services and markets (p. 137). In short, these authors do not see Shared Value as truly innovative and consider its economic significance not relevant.
Creating Shared Value in Dow Chemical
Porter and Kramer (2011) describe how Dow Chemical was able to diminish the consumption of water at its largest production facility. The reduction of one billion gallons is such a large supply that could serve the yearly needs of 40,000 people. Besides the evident societal benefit, Dow Chemical was able to save $4 million/year (p. 69)
Pfitzer, Bockstette, and Stamp (2013) also describe how Dow Chemical commercially launched Nexera canola and sunflower seeds in 2005 (p. 3). These seeds yield twice as much oil per hectare as soybeans. Hence, farmers find these seeds economically more profitable, and their lower saturated fat levels “removed 600 million tons of trans fats and saturated fats from the U.S. diet” (Pfitzer, Bockstette, & Stamp, 2013, p. 6). These are significant examples of how Dow Chemical used Shared Value to the benefit of society and of shareholders.
Conclusions from Readings and Interpretations
My most important conclusion from this debate is that Porter and Kramer (2011) struck a chord in their article, highlighting an important issue and establishing the concept of Shared Value which companies rally to, as opposed to CSR. The fact that the authors first wrote about what was nearly apparent to many, but not adequately expressed by words, is a mark of their genius, not their lack of originality.
In fact, the critiques from Beschorner (2014) and Crane, Palazzo, Spence, and Matten (2014), when addressing the economic underpinnings of Shared Value, focus on prioritizing values other than those of stakeholders. Such contention raises the natural questions: why? And whose values to prioritize? The authors also criticize the workings of the free market and capitalism at large. Such criticism is reminiscent of low-grade pseudo-Marxism, and should not have found its way into an academic journal.
Furthermore, to call Porter and Kramer (2011) view on philanthropy narrow is not correct. The authors wrote a 2002 article which already focused on the convergence of interests between “pure philanthropy” and “pure business” as an intersection of social and economic benefits (Porter and Kramer, 2002, p. 58).
Lastly, Porter and Kramer wrote a reply to Crane, Palazzo, Spence, and Matten (2014) indicating that the discourse of such academics has alienated corporations, “by insisting that profit-seeing enterprises need to abandon their core purpose for the sake of the greater good” (p. 150). I support Porter and Kramer’s view, as their attempt to combine conflicting notions with their Shared Value theory ought to be praised and followed, rather than decried as irrelevant or unoriginal.
References
Beschorner, T. (2014). Creating shared value: The one-trick pony approach. Business Ethics
Crane, A., Palazzo, G., Spence, L. J., & Matten, D. (2014). Contesting the value of “creating
shared value”. California management review, 56(2), 130-153.
Pfitzer, M., Bockstette, V., & Stamp, M. (2013). Innovating for shared value. Harvard
Business Review, 91(9), 100-107.
Porter, M. E., & Kramer, M. R. (2002). The competitive advantage of corporate philanthropy.
Harvard business review, 80(12), 56-68.
Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard business review,
89(1/2), 62-77.
